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<br />During recent years forest credit facilities have
<br />expanded. These now include national and state
<br />banks, life insurance companies, agencies of the
<br />Farm Credit Administration including Federal Land
<br />Banks and Production Credit Associatious, and the
<br />Farmers Home Administration. In addition, at least
<br />one- state has established a forest credit program.
<br />It appears therefore that there i.s a ,?-~e.d to '!'-
<br />crease public awareness of the credIt facIlities avaIl-
<br />able.
<br />Foresters in particular are in an ideal position to
<br />act as intermediaries between suppliers and users of
<br />credit, because of their frequent contacts with wood~
<br />land owners. As- an initial step, they can be instru-
<br />mental in helping landowuers qualify their tracts as
<br />coUateraI.
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<br />We recommend:
<br />
<br />That efforts be directed tQward publicizing the
<br />present favorable situation with respect to forest
<br />credit and that forest owners .who need credit be
<br />urged to' take fuU advantage of leuding facilities
<br />now available.
<br />
<br />D. Insurance
<br />Insurance against accident~l loss is ~ recogn~d
<br />principle' of business enterpnse. If t.hIs protectIon
<br />could be applied on a large scale to timber produc-
<br />tion more individual landowners, as well as corpora-
<br />tion;, would be wilIing to make the c~p.ital iuves~-
<br />ments necessary to increase the productIVIty of theIr
<br />forests. Corollary benefits would include a . lowering
<br />of interest rates when loans are secured by msurance
<br />on standing timber. Furthermore, preventable losses
<br />would tend to be reduced through the educational
<br />efforts of insuring organizations plus their support
<br />of technical research ip, Joss prevention and reduc-
<br />tion:
<br />At present o~ly a very few companie.s operatin~ in
<br />selected states-- provide insurance of timber agamst
<br />loss by flre. Relatively few landowners have applied
<br />for this protection. . Consequently insurance .rate~
<br />tend to be expensive, bec_ause of the small ba~e 0!1
<br />which they are written. The rates would dec1me If
<br />the companies could spread, the risks among more
<br />customers. ," . .
<br />The only publicage.ncy currently authOrized to.
<br />write forest insurance is the Federal Crop Insurance
<br />Corporatiou. This ageucy is authorize~ .by !aw to
<br />insure or reinsure_ agricultural commodIties Includ.
<br />ing timber. The. insurance is not limited to farms
<br />but can be writte;n ,for, any privately owned n:act.
<br />Thus far the agency has ..limited its activity to insur-
<br />ing farm' crops on an 'fall risks" basis, Le., against
<br />loss due to unavQidable cau~es including flood,
<br />drought, hail, wind, frost, winterkill, lig~tIiing, fire,
<br />wildlife; insect infestation, and plant dIsease. Al-
<br />though the agency' does not now insure timber crops
<br />againt fire, it intends to initiate research in this field.
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<br />We recommend:
<br />
<br />1. That .commercial insurance carriers be encour-
<br />aged to expand such forest insurance facilities as are
<br />now available, and that public agencies provide such
<br />insurance and reinsurance where not available from
<br />recognized private sources at reasonable cost.
<br />2: That studies be gotten under way to coUect,
<br />record, and document actuarial data on timber losses
<br />sustained due to fire and other causes for purposes
<br />of determining whether; !fall risk" insurance is feas-
<br />ible and to provide a: basis for establishing rates for
<br />uall risk" insurance.
<br />
<br />......
<br />
<br />E. Taxation
<br />Property taxes, incothe taxes, and death taxes ail
<br />have profound influences upon. decisions governing
<br />the management of land.
<br />The general property tax often becomes a serious
<br />deterrent to continuous production of forest crops
<br />by reaSGD of "its nature and the manner in which it
<br />is administered. Instability in tax rates and differ-
<br />ences between taxing jurisdictions in the methods of_
<br />assessing forest lands present critical problems. Often
<br />such _ deterrents to continuous forest production are
<br />the results of improper assessmepts or unreasonable
<br />rates, or both. The confiscatory effect of the general
<br />property tax, if levied year after year on growing
<br />trees, and if assessed"'values are not realistic in terms
<br />of income potential, discourages private -forestry
<br />enterprise and may lead to destruction of forest re-
<br />sources with consequent harm to the nation's econ~
<br />omy. Similar effects may result from special taxes
<br />on forest improvements.
<br />The federal income tax as now applied to timber
<br />has an important influence on the decision of a pri-
<br />vate landowner to practice long term forestry. Favor-
<br />able treatment undei' the Ucapital gains" provision
<br />of the present Internal Revenue Code is a strong
<br />incentive to manage forest land intensively. -Some
<br />timber owners have indicated they would return to
<br />the old Heut and get out" practice~ if the capital
<br />gains provision is removed.
<br />Inheritance and estate taxes also .affect the prac-'
<br />lice of sustained yield forestry. These taxes can cause
<br />liquidation of properties whi.ch otherWise would be.
<br />dedicated to continuons production of forest prod"
<br />nets.. ~
<br />. A forest taXation system should not discourage
<br />forestry enterprise. The aggregate burden of taxa~
<br />tion must be- commensurate with the earning power
<br />of the forest. .
<br />We recommend:
<br />
<br />1. Vigorous and prompt state ap.d local action
<br />where necessary to adjust general property tax bur-
<br />dens on f()l~st owners by _using sound aS$essment
<br />practices, including: use of valuations based on the
<br />productive capacity of th~ 'forest. .
<br />2. That the provisions of the Federal Internal
<br />Revenue Code which encourage sustained yield for-
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